H-1B Visa Fee Hike: Impact on IT & Offshoring

New Delhi, Sep 22 (PTI) The magnitude of the new H-1B visa application fee for fresh petitions - math of which works out to USD 500 million in case of 5,000 filings - may nudge IT companies to expand offshore delivery or increase local hiring, according to Motilal Oswal Financial Services.

The USD 100,000 fee will start to impact from FY27 onwards, when new petitions are filed. The visa applications for FY26 are already locked in.

"If an IT company were to apply for 5,000 H-1Bs in FY27, the annual fee alone would amount to USD 500 m (5,000xUSD 100,000). Given the magnitude of this fee, it is likely that Indian IT companies will avoid new H-1B filings altogether, opting instead to expand offshore delivery or increase local hiring," it said.

If new H-1Bs "vanish", on-site revenues will decline, but so do on-site costs.

This shift could improve operating margins, as offshore work tends to be structurally more profitable. The net effect on earnings per share could be neutral in the medium term, although topline growth could be slower, according to it.

On the evolving risk, it said the fee hike order is likely to be challenged in US courts and may not survive in its current form.

Over the last decade, Indian IT vendors have reduced their reliance on H-1B visas.

"With localisation drives in the US and higher local hiring, only about 20 per cent of employees are currently based on-site. Of this, 20-30 per cent are on H-1B visas, implying that H-1B holders represent just 3-5 per cent of the active workforce for a typical vendor," it noted.

While the H-1B programme is often portrayed as an 'India IT' visa channel, in practice, big tech companies (Google, Amazon, Microsoft, Meta and others) account for a larger share of fresh applications than Indian IT.

For IT vendors, localisation and subcontracting are already baked into their delivery models, making them relatively better placed to adjust.

On Monday, Nasscom said that US clarification that the H-1B visa fee hike will not affect current visa holders and will apply as a one-time fee only to fresh petitions, helped address the immediate ambiguity surrounding eligibility and timelines. It alleviates concerns on business continuity and uncertainty for H-1B holders that were outside the US, as per the association.

Further, it pointed out that Indian and India-centric companies operating in the US have significantly reduced their dependencies on H-1B visas and are increasing local hirings, and added, given this "we anticipate only a marginal impact for the sector".

"Moreover, with the fee being applicable from 2026 onward, it gives companies time to further step up skilling programmes in US and enhance local hiring," the apex industry body said.

The industry is spending over USD 1 billion on local upskilling and hiring in the US and the number of local hires has increased tremendously.

As per available data, H-1B issued to the leading Indian and India centric companies has decreased to 10,162 in 2024, from 14,792 in 2015. Notably, Indian tech professionals account for bulk of H-1Bs, over 70 per cent plus.

According to USCIS website, for fiscal year 2025 (data as on June 30, 2025), Amazon topped the list of H-1B visa approvals at 10,044. In that list of top ten beneficiaries, TCS (5,505) is at the second spot followed by Microsoft Corp (5,189), Meta (5,123), Apple (4,202), Google (4,181), Cognizant (2,493), JP Morgan Chase (2,440), Walmart (2,390) and Deloitte Consulting (2,353). The top 20 list includes Infosys (2004), LTIMindtree (1807), and HCL America (1728).

The Congressional mandated pool is 65,000 such visas every year along with an additional 20,000 visas reserved for those who have earned advanced degrees in the US.

The Indian IT industry breathed a lot easier on Sunday after the US government clarified that H-1B visa application fee increase to USD 100,000 applies only to new applicants and does not affect existing visa holders or renewals. The H-1B visa fee ranges from about USD 2,000 to USD 5,000, depending on employer size and other costs.

While some industry experts noted that they foresee no immediate adverse impact over the next 6-12 months as the hike takes effect only in the upcoming application cycle, there were those who, citing back-of-the-envelope calculations and cost add-ups, cautioned that there could be a deferred impact requiring reassessment eventually of business strategies by IT companies, if the rule stays.

Sajai Singh, Partner, JSA Advocates and Solicitors, has emphasised that while the immediate shock has slightly muted, seeming like a huge relief for now, it is just giving more time for the reality to set in.

"The clarifications tweak the applicability to new H-1B visa applicants, not existing visa holders or renewals. This means current H-1B holders can exit and re-enter the US freely without paying the fee; as the fee will apply to the upcoming H-1B lottery cycle. However, Indian IT companies that rely heavily on H-1B visas will still face significant cost increases, potentially disrupting business models and revenue streams," Singh said.

Eventually, all this will bring the focus back on hiring local talent in the US to reduce dependence on H-1B visa holders.

"Net-net, there may be a slight delay in the impact. But the impact will be there, requiring reassessment of business strategies. Yes, the immediate shock has slightly diluted, and so it seems like a huge relief. It's just giving more time for the reality to set in," Singh said.